- A bit of history
- general review
- Starting conditions
- Initial benefits
- Way to success
- High tech
- Economic structure
- Small and medium businesses
- Foreign economic relations
- What sells the world?
- Economic Relations with Russia
- Development prospects
A small island nation that calls itself the Republic of China is known to the whole world as Taiwan. It is recognized by 23 countries. Taiwan accepted two waves of immigrants from mainland China. The first happened when rich supporters of the Ming dynasty fled from the persecution of supporters of the Qing Empire (after about 1644).
The second was after the formation of the People's Republic of China, when the armed detachments of the Chinese Communist Party defeated and pushed 1.5 million supporters of the Guomindang conservative party onto the island. Already at the end of the 20th century, educated and hardworking emigrants created a prosperous, developed economy, naturally, with Chinese characteristics.
A bit of history
The Chinese, populating the island, gradually ousted the indigenous population (Austronesians), who now make up about 2.3% of the country's 23.5 million population. In 1895, the Qing Empire suffered a military defeat. For 50 years, the island was ruled by the Japanese. They laid the foundations for the industrialization of the island by building a hydroelectric power station and enterprises for the production of numerous types of products. For the economy of Taiwan, the history of colonization was rather positive. The island served as a showcase showing the achievements of the peoples conquered by the Japanese.
After World War II, the Kuomintang created the Republic of China on the island, the sovereignty of which, in his opinion, extended to mainland China. Land reform was an important first step towards improving the economy. At the same time, excess land was forcedly bought from the landlords and sold to the peasants with an installment plan for a long time. Economic policy stimulated industrialization.
Since the 50s, it continues to grow. As a sign of merit for the country, on the obverse of Taiwan coins there is a bust of the Kuomintang and President (1949-1975) Chiang Kai-shek, the initiator of the main reforms. Until 1987, martial law existed on the island, but from the end of the 1980s democratization of public life began. In 2000, the first peaceful transfer of presidential power took place. Over the years, from a backward country with a command economy, Taiwan has turned into an "Asian tiger." He became a major investor in mainland China.
The national economy of Taiwan has gone a way largely similar to that observed in Hong Kong and Singapore. The dynamic capitalist economy of the country is based on industrial production. Electronics, shipbuilding, light industry, mechanical engineering and petrochemistry are especially well developed. There is a negative side to this, due to a strong dependence on global demand.
Another vulnerable point is diplomatic isolation, since most countries of the world believe that the island belongs to China. Enterprises mainly belong to the small and medium business sector. The economic policy of the country stimulates the production of competitive high-tech products. However, salt, tobacco, alcoholic beverages and a number of other products are produced and sold by the state, which controls the prices of vital products.
In recent years, the country's government policy is aimed at reducing the role of the state in business. In 2017, Taiwan’s economy showed particularly excellent results. Place in the world on the WFP is a tiny state took the 23rd, beating around China, and Korea, and Singapore. The growth of the economy since 2012 in Taiwan has been stable, about 2% per year.
The beginning of the development of the economy of Taiwan was greatly influenced by the fact that far from poor supporters of the Kuomintang moved here. In addition to part of the state treasury and the ancient Chinese treasures, they brought a lot of industrial equipment from neighboring China. Many entrepreneurs, engineers and other educated people, highly skilled workers moved here. The economy of Taiwan has received a good start-up capital.
Like some other Asian countries, in order to resist world communism, the country received generous technical assistance from the United States. For 15 years (from 1950 to 1965) $ 1.5 billion a year were sent to the island. These funds were mainly spent on infrastructure construction (74%). The money received by electric, communication and transport companies.
Taiwan made good use of its good geographical position. The island is located at the crossroads of world trade routes from the US Pacific Coast and East Asia to Europe. The second important step of successful development was the exit from the list of countries with a command economy. Taiwan is on its way. The political regime focused on the development of industry, ensured political stability, security of foreign investment. Loyalty to the industrialized countries of the West also brought some dividends: in return they turned a blind eye to the authoritarianism of the authorities, the lack of basic freedoms. The main asset of the country was a disciplined, hardworking and skilled workforce.
Way to success
Good starting conditions needed to be converted into economic growth. At the first stage, the economy of Taiwan focused on the light industry, including the production of clothing, shoes, blankets, wigs. Sufficiently low cost and high performance gave Taiwanese exports a path to the global market.
From the 80s, heavy and petrochemical industries, as well as shipbuilding, began to develop. Production focused on foreign technologies and imported raw materials, sending a significant part of products for export. Together with other modern economically developed Asian countries, Taiwan began to invest in the electronics industry, which also required a sufficiently large amount of skilled labor at that time. The transition to more expensive production was also necessary, because the labor resources are very expensive.
The influence of the state on the economy made it possible to fairly easily restructure from the production of labor-intensive products of light and heavy industry to the production of consumer electronics, and in recent years to information technology. Since the end of the 1990s, Taiwan has begun to invest heavily in both digital and state-owned economies. Only low-cost government loans were issued about 20 billion dollars.
The country began to organize special economic zones and technology parks for enterprises. In Hsinchu - the largest of them. It employs about 130 thousand people. In the best years, this technopark provided up to 15% of the entire marketable product of the island. Almost everyone knows the famous Taiwanese brands - Acer, Asus, producing computers and other electronic devices.
In the dynamically developing economy of Taiwan, services occupy the largest share (62.1% of GDP), followed by industry (36.1%) and agriculture (1.8%). The transformation of the country's economy continues. Almost every year, the share of labor-intensive products and agriculture decreases, which is associated with a shortage and rise in the cost of labor resources.
Since the beginning of the 90s, the share of the production of traditional goods exported by the country has declined - cotton fabrics, bicycles, televisions and other consumer electronics. Coal in the energy sector has been replaced by other energy sources - oil and liquefied gas. Now there are three nuclear power plants built in the country.
Gradually reduced large-scale production - petrochemistry and metallurgy. The government is betting on the development of digital technologies (microelectronics, telecommunications, data processing facilities), the financial sector, the food industry and biotechnology.
Small and medium businesses
The economy of Taiwan can be briefly described as the economy of small and medium businesses. Unlike South Korea and Japan, which stimulated the creation of diversified corporations, Taiwan went a different way. Small and medium-sized businesses here make up 98% of the total number of companies. Transparent legislation, an open market policy that facilitates the flow of goods and capital, made it possible for SMEs to become the backbone of Taiwan’s economy. According to the index of economic freedom of the Heritage Foundation, the state is in 14th place and is classified as a country with a predominantly free economy.
Foreign economic relations
Diplomatic "isolation" of Taiwan imposes restrictions on the development of the country's international trade. The resolution of this issue is facilitated by the signing of an agreement on economic cooperation with China in 2010. As a result, the mainland Chinese market was opened for Taiwanese products. The country also had the opportunity to conclude trade agreements with countries with which it does not have diplomatic relations.
The main foreign trade partners of Taiwan are China, the United States, Japan and the countries of Southeast Asia. Taiwan, whose economic situation is highly dependent on foreign trade with China, is taking steps to develop new areas of trade, in particular, with Indonesia and the Philippines.
What sells the world?
International trade has been a source of economic growth in the past 40 years. Taiwan is one of the largest manufacturers of integrated circuits and liquid crystal displays, network equipment and other electronics, whose share in exports is about 32%.
Major exports become semiconductors, petroleum products, automotive parts, ships, equipment for wireless communications, displays, steel, electronics, plastics, computers. Exports in 2017 amounted to 344.6 billion dollars. The main imports are related to the supply of raw materials and components, including oil, semiconductors, natural gas, coal, steel, automobiles, and textiles. The volume of imports in 2017 amounted to 272.6 billion dollars.
Economic Relations with Russia
The structure of international trade between Taiwan and Russia is determined by the following factors: a high degree of dependence of Taiwan on the import of raw materials, rather low prices for Russian goods (due to the low ruble exchange rate), and a high demand for technological products on the Russian market. The largest supplies of raw materials and products from Russia to Taiwan are petroleum products and ferrous metals ($ 1.5 billion each). The third position is aluminum. Its supplies amounted to 136 million dollars. Also, a large percentage accounted for the supply of Russian raw materials for the Taiwanese food industry (malt, starch, inulin, wheat gluten).
The most important imports from Taiwan are electrical machinery and equipment ($ 670 million), as well as equipment for the nuclear industry ($ 610 million). At the third position is ferrous metals. Computers, laptops, smartphones manufactured in Taiwan are also widely represented on the Russian market.
The state and prospects of the Taiwan economy are reflected in the Green Silicone Island program, which implies the development of a knowledge economy, environmental conservation, the widespread use of renewable energy sources and a just society.
The government intends to increase the high-tech sector of the economy, including the opening of new industrial zones, where IT enterprises will be provided with tax breaks and all the necessary infrastructure for work. Taiwan intends to increase investment in research and development, including in the field of digital and biotechnology.
The country is already experiencing a shortage of qualified labor resources, so the system of highly specialized training and study abroad programs will be strengthened. Taiwan, whose economic development is heavily dependent on global market conditions, should reconsider its concepts and reduce the risks in the following positions:
- Relationship with China, its largest foreign economic partner.
- Competition with other manufacturers of electronic components, primarily South Korea.
- Labor shortage.
- Aging population.
- Diplomatic isolation.